Increased supply of the so-called public housing and extension of property tax to more cities would probably be on top of Chinese leaders’ minds as they seek to contain a rebound in home prices. Beijing’s housing administration on Wednesday said the capital city will allocate land by the end of this year to construct 20,000 low-cost housing units for residential purpose and that it plans to provide land for building 50,000 more such homes next year. The prices of the housing units will be 30 percent lower than the prevailing market prices in the neighborhood, and are said to range from 10,000 yuan (US$1,642) to 22,000 yuan per square meter. The units cannot be resold in the first five years after being purchased. We believe similar programs are likely to be rolled out in other cities such as Shanghai, Shenzhen, Guangzhou and Tianjin, where double-digits gains in home prices were seen in September, as authorities try to rein in the real-estate market. Meanwhile, an extension of the property tax — which is currently applied only in Shanghai and Chongqing on luxury property — is likely, encompassing other cities and provinces. The recent weakness seen in the share prices of home builders and related sectors reflects the expectation of more home curbs. That said, as most Chinese developers have already achieved or are close to meeting their 2013 sales targets, we believe the impact of possible price-control measures would only take a toll on their balance sheets next year.
Shanghai FTZ: The first land transaction deal in the pilot free trade zone (FTZ) in Shanghai was conducted on Wednesday, with a price of 230 million yuan (US$37.79 million) for a 10,005 square meter land parcel – almost double the 120 million yuan auction price. The land bidding mirrors the strong interest of both local and foreign players in scrambling for business opportunities in the FTZ. The development pace of the FTZ is expected to be accelerated and the land prices for the upcoming auctions are likely to go up. Since mid-October, companies can apply for business licenses for running an operation in the new trade zone. HSBC Holdings Plc and Bank of East Asia Ltd. are among candidates for obtaining licenses to open branches in the area.
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